- Goldman Sachs lowered its probability of a recession in the US.
- It cited improvement in the labour market and lower energy costs as reasons.
- Chief economist Jan Hatzius also raised the forecast for GDP growth in the second-half to 2%.
The United States faces lower chances of recession following a peace deal with Iran, according to Goldman Sachs. The brokerage firm cut its 12-month US recession probability from 25% to 15%, citing lower energy prices, Wall Street Journal reported.
Goldman Sachs now sees a lower chance of recession than even before the war, when the brokerage put the odds at 20%. It explained that improvement in the labour market has reduced the chances of an economic slowdown.
The 15% estimate represents Goldman Sachs' long-term norm, investing.com reported. Chief economist Jan Hatzius also increased the forecast for GDP growth in the second-half to 2%.
He said that the revision reflects "a positive sequential impulse to real income from lower gas prices, at a time when the economy continues to benefit from the AI boom via higher equity wealth as well as strong capex."
Despite his positive tone, Hatzius warned that growth would remain moderate. He forecast real consumer spending growth of 1.5%, adding that the boost from higher tax refunds in the second quarter would fade soon.
On inflation, Goldman predicts an outright decline in seasonally adjusted consumer prices in June due to falling gas prices. It predicts that core consumer price index (CPI) would average just 0.17% over the next three months.
On the subject of artificial intelligence, Goldman stated that AI-related stock valuations are "now high even relative to our optimistic views regarding the economic value that is likely to be created by AI over the next decade, so it is getting harder to justify further large gains."
Goldman Sachs Cuts Gold Forecast
Goldman Sachs recently cut its year-end gold forecast by $500 an ounce. The revised target of $4,900 an ounce for December indicates that bullion may gain ground in the second half, analysts Lina Thomas and Daan Struyven said in a note, as per Bloomberg. The rise may be less than previously expected, the note added.
Lower forecasts for inflows into gold-backed exchange-traded funds drove the revised outlook. Goldman Sachs also maintained its baseline forecast of no rate hikes by the US Federal Reserve despite a hawkish meeting under new chair Kevin Warsh.
While the central bank kept interest rates unchanged in its recent meeting, policymakers signaled increasing support for hikes this year.
